How should I go about finding a BEE partner?

BEE Partnerships

For a partnership to work, both parties must derive benefit. If either party feels there is no benefit, then the partnership or the entire business will fail. Most businesses look for an empowerment partner who can bring new benefit to the business, such as access to political influence, increased finance, and increased operational capacity, access to new markets or new product lines.

There are three types of BEE partners

Influential partners

Operational partners

Broad-based groups

Influential Partners

During the apartheid era, Blacks were discouraged from entering the business arena and as a result, they channelled their energy into the political struggle.

Operational Partners

Operation partners come from a business background, having run their own businesses independently. In most instances, they originate from the same sector as the business they merge with or buy into.

Broad-based Groups

Broad-based BEE partners comprise broad-based structures such as development trusts, union funds and business association funds. They use investment management companies to effect BEE transaction.

Finding a committed BEE partner

The best way is to network and get involved in organisations where you can meet black or white professionals. There are a number of avenues you can pursue to find a committed BEE partner. There are a number of avenues you can pursue to find a committed BEE partner. Here are a few ideas:

When looking for a partner networking with bankers, local business organisations and chambers of commerce may help point you in the right direction. Your local chamber is an excellent way for business owners to participate in business advocacy and lobbying efforts. One must go into a partnership with a company or group that you trust, and you believe will add value to your company which is why referrals from trusted associates are important.

Business-to-business networking is an effective way to share expertise and knowledge and to build relationships. Networking also helps to expand business services and provides opportunities to the other members of the network.

Scanning the industry you operate in is a good way to find a consistent, excellent performer who would qualify as a BEE partner. By doing this one also learns about reputations, reliability and how other companies conduct their businesses, which in turn can help you find a suitable partner.

It is important to get references from professional groups and the chambers of commerce are a good starting point and assist to verify potential BEE partners’ credentials.

There are independent consultants who specialise in putting together BEE deals of all sizes. They are trained to look into the details of the transaction, investigate empowerment ratings and compliance, as well as make recommendations on what strategies you would be able to pursue.

Striking the right balance

Choosing the right BEE partner need not be difficult. The answer lies in both parties’ ability to identify their qualities and ensure that they do not overlap as there is little value in a partnership where skills and abilities are replicated.

To form a mutually beneficial BEE deal find out exactly what you need in a BEE partner:

Do you need to empower employees?

Do you need to find an active partner to share in the management of the business? In which case will both parties add value to the business?

Do you just need a silent partner who will acquire equity in the company?

Merging a black and white company who share an operational interest will have a stronger change of creating new markets, be more efficient and be able to develop new products.

What are the legal considerations needed structuring a BEE partnership deal?

Taking a BEE partner means that enterprises must be based on solid ethical standards

Legislative compliance

Firstly, make sure you are well informed of the laws, Codes of Good Practice, Industry Charters and the relevant importance of each of them in relation to your own industry. Taking a BEE partner means that enterprises must be based on solid ethical standards and values, and follow full regulatory and legislative compliance.

BEE acquisition agreement

If your BEE partner is acquiring an interest in the ownership structure of your organisation, a suitable written agreement must be entered into. Agreements of this nature usually cover a purchase of existing shares or a subscription for new shares in your enterprise.

A shareholders’ agreement is usually entered into in terms of which the rights of the BEE partner and the existing shareholders in relation to the appointment of directors, its involvement at management level and detailed pre-emptive rights, come-along clauses and go-along clauses on the sale of business (by the majority) are dealt with in detail. Specific legal advice should be obtained in this regard before signing any agreement. This is in the interests of both the selling shareholder and the acquiring BEE shareholder.

Check your BBE status

There is no single method that can be applied to BEE evaluations. Every enterprise’s position should be suitably assessed with due regard to the Codes of Good Practice and the specific industry charters which may apply to the specific industry in which the enterprise is operating. Any enterprise which is uncertain as to its status, should obtain legal advice from law firms which specialise in this area of practice.

Attorneys who have been involved in numerous BEE deals will be able to assist companies in advising them on their legal BEE status. It is also advisable for companies to obtain a BEE rating from a suitably qualified rating agency, such as Empowerdex.

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What steps do I need to take to start manufacturing toilet paper?

The business of producing toilet paper has been recognised as one of the fastest developing assembling commercial initiatives in Africa.

Toilet paper is used in our homes, work places, schools, hotels, restaurants, shops, maternity homes, hospitals, churches, clubs and many others. It can be used in various other ways such as cleaning up messes and decoration.

The difference between toilet paper and other tissues is that it is created to breakdown in septic tanks and other tissues don’t necessarily do this.

To start and run a business, it is not enough just to have a good, viable idea. You also need to have the right skills, attitude and personality to make the enterprise succeed.

Benefits of starting a toilet paper production business

It has a simple production procedures

There are not many product offerings or varieties

Simple organisational involved

High interest on the product

Easy to market

Product is a primary necessity in society.

Possible challenges of starting a toilet paper production business

The biggest constraint will be the insufficient amount of planted trees. This will affect you as this is where you will harvest your raw materials from. This can result in a reduction of plantation productivity. According to the Paper Manufacturers Association of South Africa 60% of all plantation trees are planted and grown especially for pulp and paper production.

You will need to apply for water permits to meet the terms of the regulatory framework managing water usage. This is a long and difficult process and can limit you from achieving profitable operations.

Transport, labour and licence costs will have a negative impact on your ability to competitively trade. You will need to apply cost control measures to remain competitive.

Did you know?

In an average public bathroom, it takes 71 separate visits to finish a single roll of toilet paper.

Financing your venture

It’s most likely that you will need finance when setting up a toilet roll production business. The toilet roll production equipment is available in South Africa and ranges for a single machine from R175 000 for the bottom end of the range model to R500 000 for a fully automated machine.

Manufacturing plants are also very large in size which means financing it will be quite expensive. You should use your capital to purchase the equipment you’ll need.

Try and save money by buying economical but high quality equipment. Once you have all your equipment find a premise that will accommodate all of it. Once that is completed then contact stores and potential clients.

You can save money by renting or buying an inexpensive lot for your toilet paper business. You could even start in a smaller building and when you have increased your funds, upgrade your facilities into a bigger space. Make sure to take all of the costs into account when trying to finance your toilet paper business.

You’ll have to include raw material required to make the rolls. These are supplied in jumbo tissue rolls and cost from R6 600 per ton. You will also have to take into account staff.

Zhauns, a supplier of business opportunity machinery supports BEE by offering a variety of empowering programs for street vendors, unemployed and disadvantaged groups through consortiums, local and international joint ventures and has financial links which assist entrepreneurs in need of funding.

A start-up would need two-five people operate a small business of this kind. It takes about three months to set up the business and to properly train staff to operate machinery”. Zhauns offer free training when they install equipment purchased through them.

Planning

Planning is always your starting point when starting a new business. There are several techniques you can use for your planning process. You can use ready and existing techniques and plans or you can use innovative techniques which will make your toilet paper business more unique.

Focus on the specifics of what you will need for your toilet paper business such as equipment, employees, property and raw materials. Making errors during the planning phase is normal. After your plan is finalised it should be flexible enough that you can add changes.

In this industry you are not just competing with local manufacturers. When you become a toilet paper business owner you have to figure out how you’re going to compete with different international manufacturers.

Speak to owners of similar businesses

The best source of information you can find about an area of business, is other toilet paper business owners. They will tell you in practical terms whether your ideas are feasible or not.

To locate similar businesses which can give you advice on any aspect of their toilet paper business, contact your local Chamber of Commerce. Shereen Crowie of Curviro Trading says: “It’s a commodity with no age restriction and no seasonal production demands.”

For support and guidance

If you are going to be a toilet paper business owner you need to have business skills, even more so than technical skills about your product or service. This means you have to understand finance.

You need to know how much your idea is going to cost you, whether it will make enough money to pay back these costs and make enough in addition to satisfy your requirements.

One such arm is Khula Enterprise Finance which is a wholesale finance institution that has well-developed ties in the public and private sectors.

Through these channels – which include commercial banks, retail financial institutions, specialist funds and joint ventures they play an effective role in order to bridge finance gaps that are not addressed by commercial financial institutions in the small business sector.

Did you know?

People use on average 8.6 sheets per trip, which is a total of 57 sheets per day. That’s an annual total of 20,805 sheets.

Training

It is recommended to get training when joining the toilet paper business industry. There are many essential practical skills which you will need when starting a toilet paper business.

There are courses offered by universities which will help improve your skills and understanding of the technology involved. You can alternatively get training from current experts in this field.

You can apply for internships at factories and get first-hand experience. If this is your plan of action make sure to take very detailed notes about all the process involved.

Draw up a business plan

Business plans are essential for businesses from when they start out to years later when your businesses has evolved and improved.

It becomes a guide for you and your employees to track whether your business has gone off course from the core of quality production. Experts can be hired to help you draw up a toilet paper business plan for a fee.

Business plans can be used to organise everything from your marketing strategy to the strengths and weaknesses of your business.

Employees

This type of business will require trained employees. It would be a definite advantage if you hired experienced operators or people experienced in similar industries.

This will allow you to hit the ground running instead of slowly training your staff from scratch.

Hiring inexperienced people can also cause a decline in the quality of your production as well as a decline in the level of your toilet paper businesses productivity.

Marketing strategies

Once production has started you will need to come up with various ways of distributing your product.

Since your brand is new, you will most likely have to do a demanding marketing drive so that customers know who you are.

Customers won’t buy your brand if they don’t know who you are. Advertising consultants can help your toilet paper business with effective strategies which will help increase sales.

Which works better buying machinery first or getting orders before buying equipment?

Look at your market before spending the money. It is good business practice to establish if there is a market for your product before buying expensive equipment. For this reason, it is vital to do research and to prepare a business plan.

Renting manufacturing equipment for this purpose may be a solution. Once the toilet paper business is up and running you can then consider buying your own machines.

Buying outright can result in a huge drain on cash in the first year of your toilet paper business.

Did you know?

In South Africa a family of four uses approximately one toilet roll every 1.5 days

Example of innovative thinking

Chandaria Industries operates out of Kenya and Tanzania. They sell their products in 15 African countries.

What sets them apart from their competitors is they make their recycled toilet paper from used paper.

What innovative thinking does for them, their communities and their country:

They are making money from recycling

They are transforming waste into a necessity

They are now a source of national wealth

They provide employment for many thousands of people

Just the used paper recycling activities creates nearly 20 000 jobs. By doing this they have saved over 30 million trees since they started in 1964. They still have more room to grow, saying that they don’t get as much used paper as they need.

Expansion options

Toilet paper will always be a necessity in people’s lives. Where your toilet paper business can grow to:

It’s advisable to check with the Department of Home Affairs that your work permit or temporary resident permit is in order. There is a possibility that a business banking account cannot be opened in your name because there is any question to the legitimacy regarding your residency in South Africa.

Standard Bank has a policy of vetting non-citizen customers who would like to open any account with the bank. For FICA and KYC (know your customer) purposes, Standard Bank accepts a valid passport and proof of residence, the requirements are the same for citizens and non-citizens: all are required to bring acceptable documents (e.g. utility bill) that confirm place of residence in SA.